In the retail sector, customers purchase goods and services using cash, credit cards, or debit cards. While some purchases are not subject to taxation, most are. Food and beverage purchases in a restaurant, for example, can be subject to state and local sales taxes.
For each sales transaction that is subject to taxation, a merchant is legally obligated to pay tax at a rate that is set based on the location of the retailer. Thus, in New York City, there may be one rate, whereas in a suburban community outside New York City but still in the state of New York, there may be a different rate, whereas the same sales might not be subject to tax at all in a different state or during a state-sponsored promotional period to encourage shopping.
Merchants are obliged to collect tax from their customers. The collected tax is subject to voluntary reporting, yet the monies collected are co-mingled with other funds collected from operation of the retail enterprise. Meanwhile, the merchant has operating expenses in connection with running the business, such as payroll, inventory, rent, electricity, information services, franchise fees, and so on. It is important for the merchant to maintain accurate accounting records so that the business is not supported by tax revenue that is being held by the merchant until its next tax payment (typically, a monthly or a quarterly payment).
When the sales transaction is made in cash, the merchant receives monies sufficient to cover the sales price and any taxes collected from the customer. When the sales transaction is made by the customer tendering a transaction card (that is, either a debit or credit card), the merchant receives monies in the form of additions to its bank balance in the amount of the sales price and any taxes collected from the customer.
It would be an improvement in the art of such transaction processing to avoid co-mingling for as many sales transactions as possible. It would be a further improvement in the art if the tax revenue collected from a customer were not co-mingled with sales revenue collected by the merchant. Still a further improvement in the art would be a system that transfers to a taxing authority on an automated basis as much of the collected tax as possible substantially when the merchant's bank account is credited with the sales transactions with its customers. The present invention addresses these and other needs in the art.